LABOR RELATIONSHIP MANAGEMENT FOR FOREIGNERS IN VIETNAM

Foreigners working in Vietnam, in addition to the usual labor procedures, must also follow a number of separate regulations. Labor relationship management for foreigners, if done right from the beginning, will not only avoid risks but also help optimize taxes and insurance payments. OTIS LAWYERS would like to share with you the basic regulations on labor relationship management for foreigners that any foreign worker or foreign employer must comply with.

MANAGE EMPLOYEE PROFILES AND SET LABOR CONTRACT

• Personal records.
• Records proving professional competence and experience.
• Decision appoint.
• Received the invitation.
• Labor contract.
• Rental contract

Employee records are a mandatory content for enterprises, for foreign workers, employee records are also related to the possibility of being granted a work permit, a residence card, the obligation to declare and pay taxes. personal income, procedures for opening a bank account, etc. Foreigners should clearly understand the requirements of each type of record and keep and update it fully to meet the requirements of local state authorities. during the time working in Vietnam.

Labor contract is a very important procedure that establishes the rights and obligations between the employee and the enterprise. The labor contract is also related to the mandatory obligations of personal income tax, insurance, procedures for receiving wages, and repatriation of wages. Failure to manage the form, content and terms of the labor contract will lead to serious disputes or increase tax costs and hinder other work of foreigners.

WORK PERMIT AND TEMPORARY RESIDENCE CARD

• Foreign workers must present a work permit when completing immigration procedures and upon receiving requests from competent state authorities. Foreign workers working in Vietnam without a work permit will be expelled from Vietnam according to the Government's regulations. Employers who hiring non-permit foreign workers will be handled in accordance with the law.
• After obtaining a valid work permit, a foreigner can be granted a temporary residence card. Temporary residence card can be seen as a type of long-term visa. However, unlike Visa, the temporary residence card has a longer duration, usually issued with a term of 1 to 5 years. Foreigners with temporary residence cards will be exempted from visas and can enter and exit many times according to their work needs during the validity of the card, thus saving time and costs. In addition, the holder of a temporary residence card can also guarantee the issuance of a card with an equivalent term to family members.
• After obtaining a work permit and temporary residence card, foreigners will be allowed to open all kinds of bank accounts, credit cards, passbooks and fully use banking services like residents.

SALARY CALCULATION AND TAXABLE INCOME MANAGEMENT

• The salary of foreigners is not only based on the agreement between the parties, but also must be consistent with nationality, professional qualifications, experience, and position. In case the salary is not reasonable, the tax authority will carry out inspection and verification procedures at home and abroad, affecting other jobs of employees.
• In addition to salary, foreign workers can also receive other benefits such as work-trip allowances, house rent, accommodation, insurance, children's school fees, preferential cards, etc. may be subject to personal income tax or may not be required to pay personal income tax, as the case may be. There have been many foreigners who have incurred additional PIT and fines for not properly managing these incomes.
• Foreigner's salary can be paid in USD or other foreign currency, the payment procedure in foreign currency with each bank will have different requirements.

REQUIRED SOCIAL INSURANCE AND HEALTH INSURANCE

• Employees who are foreign citizens working in Vietnam are eligible to participate in compulsory social insurance when they have a work permit or a practice certificate or a practice license issued by a competent authority of Vietnam. and have an indefinite-term labor contract or a definite-term labor contract of full 01 year or more with an employer in Vietnam.
• Regarding the employee's contribution rate, from January 1, 2022, employees who are foreign nationals working in Vietnam are subject to compulsory social insurance, paying 8% of the monthly payment amount. monthly salary to the retirement and survivorship fund. At the same time, the employer shall make monthly contributions to the employee's monthly salary on which social insurance premiums are based: 3% to the sickness and maternity fund; 0.5% to the labor accident and occupational disease insurance fund; 14% into retirement and survivorship funds from January 1, 2022.
• Foreigners who are enjoying their monthly pension or social insurance allowance when they no longer reside in Vietnam can authorize another person to receive their pension or social insurance allowance. If they wish, they will be entitled to a onetime allowance.

PERSONAL INCOME TAX MANAGEMENT

• To determine the valid method of personal income tax (PIT) declaration for foreigners, tax authorities will rely on passports, employment contracts, appointment letters / tax withholding documents, rental contract.
• Depending on the case of a resident or non-resident individual. PIT must also be declared and finalized for incomes generated in Vietnam or worldwide. Taxable amounts/tax rates between resident and non-resident individuals are completely different. Failure to file a clear and valid PIT will result in fines for the tax authorities in the following years. A skilled consultant will assist the client in managing employee records / reports as required by law as well as reports / declarations to ensure that the records are correct from the very beginning and for 3 months. or the next 5 years.
• Resident Individuals with incomes generated abroad who have calculated and paid personal income tax abroad shall be entitled to deduct the tax amount already paid abroad. The deductible tax amount must not exceed the payable tax amount calculated according to Vietnam's tax table distributed to the income generated abroad. The distribution ratio is determined by the ratio between the amount of income generated abroad and the total taxable income.
• Residents earning incomes from wages or salaries in case the number of days present in Vietnam in the first calendar year is less than 183 days but counted in 12 consecutive months from the first day of presence in Vietnam is 183 days or more, the first tax period is 12 consecutive months from the date of entering Vietnam, the second tax period is according to the calendar year. The first tax year: to declare and submit the final settlement dossier within 90 days from the date of calculation of full 12 consecutive months. From the second tax year: declare and submit tax finalization documents no later than the 90th day from the end of the calendar year. The amount to be paid in the second tax year is determined as follows:
• Resident foreigners who terminate working contracts in Vietnam shall finalize tax with tax authorities before leaving the country.
• The personal income tax rate from salaries and wages of non-resident individuals is determined by taxable incomes from salaries and wages of workers (x) with the tax rate of 20%. Taxable income from salaries and wages of non-resident individuals is determined as for personal income taxable incomes from salaries and wages of resident individuals.
• Tax rates and tax bases for resident individuals. Whose incomes from salaries and wages are determined by taxable incomes from business. Wages and salaries are assessable incomes. Assessable earnings are equivalent to taxable income minus (-) the following deductions: Family deductions; Insurance contributions and voluntary retirement funds; Charitable, humanitarian and study promotion contributions. Personal income tax rates for incomes from business, salaries and wages are applied according to the partially progressive taxation, specifically:

TERMINATION OF LABOR RELATIONSHIP AND RELATED PROCEDURES

When terminating the labor relationship, foreigners need to manage the following documents to avoid arising risks:

• Agreement to terminate the labor contract.
• Decision to terminate the job.
• Record of handing over work
• Minutes of liquidation of labor contract.
• Receipt withholding PIT.
• Cancellation or refund of work permits and temporary residence cards.
• Carry out tax finalization procedures and obtain a certificate of completion of tax obligations before leaving Vietnam.

For any questions or comments, please contact:
OTIS AND PARTNERS LAW FIRM
Office address: K28 - Group K, Lane 68 Trung Kinh, Yen Hoa Ward, Cau Giay District, Hanoi
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